Lecture 4

Hypothesis Testing
Charles Kaondera
Stewart Muchuchuti
Botswana Accountancy College
 Lecture 4
Hypothesis Testing
 Developing Null and Alternative Hypotheses
 Type I and Type II Errors
 Population Mean: s Known
 Population Mean: s Unknown
 Population Proportion
 Hypothesis Testing and Decision Making
 Hypothesis Testing

 Hypothesis testing can be used to determine whether

a statement about the value of a population parameter
should or should not be rejected.
 The null hypothesis, denoted by H0 , is a tentative
assumption about a population parameter.
 The alternative hypothesis, denoted by Ha, is the
opposite of what is stated in the null hypothesis.
 The hypothesis testing procedure uses data from a
sample to test the two competing statements
indicated by H0 and Ha.
 Developing Null and Alternative Hypotheses

• It is not always obvious how the null and alternative

hypotheses should be formulated.
• Care must be taken to structure the hypotheses
appropriately so that the test conclusion provides
the information the researcher wants.
• The context of the situation is very important in
determining how the hypotheses should be stated.
• In some cases it is easier to identify the alternative
hypothesis first. In other cases the null is easier.
• Correct hypothesis formulation will take practice.
 Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research Hypothesis

• Many applications of hypothesis testing involve
an attempt to gather evidence in support of a
research hypothesis.
• In such cases, it is often best to begin with the
alternative hypothesis and make it the conclusion
that the researcher hopes to support.
• The conclusion that the research hypothesis is true
is made if the sample data provide sufficient
evidence to show that the null hypothesis can be
rejected.
 Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research Hypothesis

• Example:
A new teaching method is developed that is
believed to be better than the current method.
• Alternative Hypothesis:
The new teaching method is better.
• Null Hypothesis:
The new method is no better than the old method.
 Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research Hypothesis

• Example:
A new sales force bonus plan is developed in an
attempt to increase sales.
• Alternative Hypothesis:
The new bonus plan increase sales.
• Null Hypothesis:
The new bonus plan does not increase sales.
 Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research Hypothesis

• Example:
A new drug is developed with the goal of lowering
blood pressure more than the existing drug.
• Alternative Hypothesis:
The new drug lowers blood pressure more than
the existing drug.
• Null Hypothesis:
The new drug does not lower blood pressure more
than the existing drug.
 Developing Null and Alternative Hypotheses

 Null Hypothesis as an Assumption to be Challenged

• We might begin with a belief or assumption that
a statement about the value of a population
parameter is true.
• We then using a hypothesis test to challenge the
assumption and determine if there is statistical
evidence to conclude that the assumption is
incorrect.
• In these situations, it is helpful to develop the null
hypothesis first.
 Developing Null and Alternative Hypotheses

 Null Hypothesis as an Assumption to be Challenged

• Example:
The label on a soft drink bottle states that it
contains at least 67.6 fluid ounces.
• Null Hypothesis:
The label is correct. m > 67.6 ounces.
• Alternative Hypothesis:
The label is incorrect. m < 67.6 ounces.
 Summary of Forms for Null and Alternative
Hypotheses about a Population Mean

The null hypothesis must always represent the

statement that contains the equality sign
 In general, a hypothesis test about the value of a
population mean  must take one of the following
three forms (where 0 is the hypothesized value of
the population mean).

H 0 :   0 H 0 :   0 H 0 :   0
H a :   0 H a :   0 H a :   0

One-tailed One-tailed Two-tailed

(lower-tail) (upper-tail)
 Null and Alternative Hypotheses

 Example: Metro EMS

A major west coast city provides one of the most
comprehensive emergency medical services in the
world. Operating in a multiple hospital system
with approximately 20 mobile medical units, the
service goal is to respond to medical emergencies
with a mean time of 12 minutes or less.
The director of medical services wants to
formulate a hypothesis test that could use a sample
of emergency response times to determine whether
or not the service goal of 12 minutes or less is being
achieved.
 Null and Alternative Hypotheses

The emergency service is meeting

H0: 
the response goal; no follow-up
action is necessary.

The emergency service is not

Ha:
meeting the response goal;
appropriate follow-up action is
necessary.

where:  = mean response time for the population

of medical emergency requests
 Type I Error

 Because hypothesis tests are based on sample data,

we must allow for the possibility of errors.
 A Type I error is rejecting H0 when it is true.
 The probability of making a Type I error when the
null hypothesis is true as an equality is called the
level of significance.
 Applications of hypothesis testing that only control
the Type I error are often called significance tests.
 Type II Error

 A Type II error is accepting H0 when it is false.

 It is difficult to control for the probability of making
a Type II error.
 Statisticians avoid the risk of making a Type II
error by using “do not reject H0” and not “accept H0”.
 Type I and Type II Errors

Population Condition

H0 True H0 False
Conclusion (m < 12) (m > 12)

Accept H0 Correct
Type II Error
(Conclude m < 12) Decision

Reject H0 Correct
Type I Error Decision
(Conclude m > 12)
 p-Value Approach to
One-Tailed Hypothesis Testing
 The p-value is the probability, computed using the
test statistic, that measures the support (or lack of
support) provided by the sample for the null
hypothesis.
 If the p-value is less than or equal to the level of
significance , the value of the test statistic is in the
rejection region.
 Reject H0 if the p-value <  .
Suggested Guidelines for Interpreting p-Values

 Less than .01

Overwhelming evidence to conclude Ha is true.
 Between .01 and .05
Strong evidence to conclude Ha is true.
 Between .05 and .10
Weak evidence to conclude Ha is true.
 Greater than .10
Insufficient evidence to conclude Ha is true.
 Lower-Tailed Test About a Population Mean:
s Known
 p-Value Approach p-Value < a ,
so reject H0.

a = .10 Sampling
distribution
x  0
of z 
/ n
p-value
72

z
z = -za = 0
-1.46 -1.28
 Upper-Tailed Test About a Population Mean:
s Known
 p-Value Approach p-Value < a ,
so reject H0.
Sampling
distribution a = .04
x  0
of z 
/ n

p-Value
11

z
0 za = z=
1.75 2.29
 Critical Value Approach to
One-Tailed Hypothesis Testing
 The test statistic z has a standard normal probability
distribution.
 We can use the standard normal probability
distribution table to find the z-value with an area
of a in the lower (or upper) tail of the distribution.
 The value of the test statistic that established the
boundary of the rejection region is called the
critical value for the test.
 The rejection rule is:
• Lower tail: Reject H0 if z < -z
• Upper tail: Reject H0 if z > z
 Lower-Tailed Test About a Population Mean:
s Known
 Critical Value Approach

Sampling
distribution
x  0
of z 
Reject H0 / n

a 1
Do Not Reject H0

z
-za = -1.28 0
 Upper-Tailed Test About a Population Mean:
s Known
 Critical Value Approach

Sampling
distribution
x  0
of z 
/ n Reject H0


Do Not Reject H0

z
0 za = 1.645